Short term memory
Most people will not even remember
A few days ago markets didn't perform their best. How many people got liquidated is a question worth asking. But more importantly why are people changing their position so quickly? One time people echo this will be the biggest bull market you've ever seen, and another moment they are saying completely the opposite.
Why is that?
This should be something deeply rooted in our human psychology. The more I observe, the more I see that everything is pure psychology. From leadership, to endurance, to markets, to being successful, to even the quality of life you will lead. But now let's return on the markets.
It is in our human psychology to change our opinions or to be conformists. That's why the bandwagoon effect is real, people tend to jump on whatever is trendy. Plus, most people do not have the time and proclivity to think for themselvse. After all, the shortest path is the most desirable one. That's why everyone absolutely loves easy/free money. Unfortunately, the world doesn't function like that. To think and arrive to a wrong conclusion is better than not to think. After all, at least you have the habit and could improve if you are willing to learn. But if you never have thesis/anti-thesis, then how would you ever improve? Imagine a robot, who only does X without thinking.
- How could he know if that's correct.
- Even if he distinguishes between correct/incorrect - how does he change his behaviour?
So it is absolutely essential to think - which most people don't have the time to do so. With this information available, the picture of why opinions are so easily swayed becomes clearer & clearer.
Even if people do not think - who do they choose to follow? Is it by pure chance that whichever idea gets firstly introduced to most people, becomes the new kid on the block? It could be, but in order for an idea to appeal to so many people, it has to have something that people like (it has to fit their narrative to the world)
If that's the case, could this be the reason why market overreacts so often? For example one slightly not good Q report, and their stock price falls 30-40% (only to recover later) If that's true -> opposite should also be true, it would also overreact on the upside. For example quantum companies are jumping 100-500% just because alphabet made some discovery (still far from real use-case + most quantum companies are fairy dust anyway) But speculation is real. And will continue to be real, since people like easy money. Speculation is borrowing the asset short term, hoping to trade for higher returns (unlike investing, where you have true belief in the underlying asset and want to own it usually).
So whatever happens, it happens for only 3 days (most probably)!